The Federal Government has approved a special production-linked tax credit for Shell Plc’s Bonga Southwest Aparo deepwater oil project, a landmark decision expected to unlock an estimated $20 billion in investment and accelerate growth in Nigeria’s oil and gas sector. Under the new fiscal arrangement approved by President Bola Tinubu, Shell and its partners will receive a tax rebate of $11.50 for every barrel of crude oil produced from the project, a figure reported to be more than double the standard incentive currently available.
According to reports, the incentive is designed to push the long-delayed Bonga Southwest Aparo project closer to a Final Investment Decision, paving the way for one of Nigeria’s largest undeveloped deepwater oil fields to move into full development. Sources familiar with the matter revealed that the production-linked tax credit could also be extended to other international oil companies undertaking new deepwater projects in Nigeria, with the policy expected to remain in place until at least 2029.
The move represents another major step in the government’s efforts to revive investor confidence in an industry that has faced years of declining investment due to oil theft, pipeline vandalism, security concerns, ageing infrastructure, and regulatory uncertainty. Industry stakeholders believe the enhanced tax incentive will improve the commercial viability of costly deepwater operations, making Nigeria more attractive to global energy investors at a time of intense competition for capital.
The Bonga Southwest Aparo project is expected to play a significant role in boosting Nigeria’s oil output once operational. According to the Nigerian National Petroleum Company Limited, the field could produce approximately 150,000 barrels of crude oil per day, strengthening the country’s production capacity and supporting revenue generation. Recent figures from the Nigerian Upstream Petroleum Regulatory Commission already indicate positive momentum, with Nigeria’s crude oil production rising to an average of 1.56 million barrels per day in June, the highest monthly output recorded since April 2020.
While the incentive package has been welcomed by industry players, some investors remain cautious about the long-term durability of executive orders, which can be amended or challenged by future administrations. To provide greater certainty, Shell has reportedly requested that the tax-credit order be published in the Official Gazette, a process government officials have already begun. If fully implemented, the policy could unlock stalled projects, attract fresh foreign investment, create thousands of jobs, and reinforce Nigeria’s position as Africa’s leading oil producer.
source: punch
